How to Sell Cash Secured Puts on Fidelity: Step-by-Step Guide + Demo
POINTS
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Cash secured puts generate income through option premiums.
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The strike price sets your potential purchase price.
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The premium is your maximum profit if the put expires worthless.
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Your breakeven is the strike price minus the premium.
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You can close or roll the position before expiration.
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The main risk is a sharp stock decline after selling the put.
Fidelity investors can sell cash-secured puts against cash reserved to purchase shares if assigned.
The strategy generates option premium while placing capital at risk of a stock purchase at the put’s strike price.
Fidelity supports cash-covered put trading in eligible options accounts.
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What Is a Cash-Secured Put?
A cash-secured put is simply a put option write with cash collateral.
When you sell a put, you collect the option premium up front and promise to buy 100 shares of the stock at the strike price if the option is exercised by the buyer.
Since you’re selling a cash-secured put, you must reserve enough cash in your account to actually buy those shares if assigned.
The premium is yours to keep no matter what.
Imagine a stock is trading at $50, but you’d be happy to buy it for $45.
You sell a $45 put and receive $2 per share in premium.
- You receive: $200 ($2 × 100 shares)
- You set aside: $4,500 ($45 × 100)
- If the stock stays above $45 → you keep the $200 and don’t buy the stock.
- If the stock falls below $45 → you buy 100 shares for $45 each.
- Because you received $2 in premium, your effective cost is $43 per share.
So, you get paid $200 to agree to buy the stock at $45 if it falls to that level.
How to Sell a Cash-Secured Put on Fidelity
Fidelity cash-secured puts are generally available at Options Trading Level 2.
Trader+ Web Steps
- Log in: Sign in to your Fidelity brokerage account and go to Accounts & Trade → Fidelity Trader+ Web.
- Enter the symbol: Type the underlying stock ticker in the Symbol field and submit.
- Open Option Chain: Switch the view to the Options Chain. This will list available calls and puts for various strikes and expirations.
- Find the put: Use filters to select Puts and the expiration you want. Scroll to the strike price you wish to sell. Each row has buy/sell links or checkboxes.
- Choose “Sell to Open”: Check the box next to your chosen put strike and click Trade. In the order ticket, select Sell to Open.
- Preview and submit: Review the premium, total credit, required cash, etc., then Preview your order. Click Place Order to execute.
- Confirmation: After submission, you’ll see the order details on your Orders page.
Once your order is filled, Fidelity will hold the required cash as collateral for the put, and you will keep the premium received as long as the option expires worthless or you close the position before assignment.
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Mobile App Steps
Fidelity’s Mobile® app now supports full options trading. The steps are quite similar to the web:
- Open the Fidelity Mobile app and log in to your brokerage account.
- Go to Trade and select Options
- Enter the ticker
- Select Expiration & Strike
- Tap the strike row and choose Sell. Enter the number of contracts and limit price.
- Confirm the order details and submit.
How Much Cash Do You Need?
The table below shows how a $50 cash-secured put works, including the cash reserved, premium received, potential assignment, breakeven price, profit, and risk.
| Item | What It Means | Example |
|---|---|---|
| Action | Sell a put to open | 1 contract |
| Strike price | Price you may have to pay for the shares | $50/share |
| Shares per contract | Standard U.S. equity option | 100 shares |
| Cash reserved | Strike × 100 × contracts | $5,000 |
| Premium received | Cash received for selling the put | $200 |
| If stock stays ≥ $50 | Put expires worthless | Keep $200 |
| If stock falls < $50 | You may be assigned 100 shares | Pay $5,000 |
| Breakeven | Strike − premium/share | $48/share |
| Maximum profit | Premium received | $200 |
| Maximum loss | If stock falls to $0 | $4,800 |
| Options approval | Fidelity requirement | Tier 1 |
| Margin borrowing | Required when fully cash-secured | $0 |
How to Choose a Strike Price and Expiration
| Choice | What You Get | What You Give Up |
|---|---|---|
| Lower strike | Lower purchase price if assigned; more downside cushion | Less premium |
| Higher strike | More premium; closer to current stock price | Higher chance of buying the shares |
| Shorter expiration | Faster time decay; cash committed for less time | Less premium per contract in many cases |
| Longer expiration | More premium and more time value | Cash committed longer; more time for the stock to fall |
You need to
- Choose a strike price at which you would genuinely be comfortable buying the stock, and
- Choose an expiration that gives you a time period you are comfortable keeping the cash committed.
What Happens After You Sell a Put?
A cash-secured put gives you the premium upfront in exchange for the obligation to buy 100 shares at the strike price if the option is assigned.
| When | What Happens? | Your Result |
|---|---|---|
| You sell the put | You get $200. Your broker sets aside $5,000 in case you have to buy the shares. | You are agreeing to potentially buy 100 shares for $50 each. |
| Stock stays above $50 | The put becomes worthless. | You keep the $200 and don’t buy shares. |
| Stock falls below $50 | You may be required to buy the shares. | You buy 100 shares for $50 each. |
| You get assigned | Your $5,000 is used to buy the 100 shares. | You now own 100 shares. |
| Your effective price | You already received $200 for selling the put. | Your effective cost is $48/share ($50 − $2 premium). |
| You don’t want the shares? | Before assignment, you can Buy to Close the put. | The obligation goes away. |
| Want more time? | You can roll the put by closing the old one and selling another put. | You create a new trade with a new expiration/strike. |
| Stock falls a lot | You can still be assigned at $50 even if the stock is now much cheaper. | You own the shares, and they may have an unrealized loss. |
At expiration,
- If the stock is above the strike price, the put generally expires worthless, and you keep the premium;
- If the stock is below the strike price, you may be assigned and buy the shares at the strike price.
Pros & Cons
A cash-secured put has some clear benefits, but it also comes with important risks.
Pros
- Earn money from the premium
- Buy the stock at a lower price
- Get paid while you wait
- Good if you already want to own the stock
- Can earn income from your cash
Cons
- You can lose a lot if the stock falls
- Your profit is limited
- You miss out on big gains if the stock rises
- Your cash is tied up
- You may have to buy the stock if it falls
Overall, it can be a good strategy if you’re comfortable owning the stock and accepting the downside risk.
Cash-Secured Puts at Fidelity FAQ
You need a Fidelity brokerage account approved for options and enough cash to cover the strike price × 100 shares per contract.
Yes, select “Cash” as the trade type so Fidelity reserves your cash instead of borrowing on margin.
You buy the shares at the strike price using your reserved cash. Early assignment is possible, though it’s relatively uncommon.
To close it, place a Buy-to-Close order. To roll it, close the existing put and open another with a different strike or expiration.
Yes, an in-the-money put is generally automatically exercised at expiration. If it expires out of the money, you keep the premium.
Yes, because you have the cash to buy the shares if assigned, but you can still face significant losses if the stock falls.
A cash-secured put lets you potentially buy shares while earning a premium, while a covered call earns premium on shares you already own.
Yes, options trades can have tax consequences, and the treatment depends on your circumstances and country of residence.
No, a cash-secured put can generate premium income even if you never buy the shares.
Fidelity may use available funds and then borrow on margin if permitted, which can result in interest charges or liquidation.
Yes, but each contract generally requires enough cash to cover its strike price × 100 shares.
Yes, you can roll to a higher or lower strike by closing the existing put and opening a new one.
References:
- https://www.fidelity.com/learning-center/smart-money/cash-secured-put
- https://www.fidelity.com/learning-center/investment-products/options/options-strategy-guide/shortput-cashsecured
- https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/learning-center/Selling-options_Part%203.pdf
- https://www.fidelity.com/viewpoints/active-investor/selling-options
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